Just hours after Elon Musk reportedly told a select group of potential investors that Tesla would become a half a trillion dollar company on the back of his autonomous, robotaxi ambitions, it announced it would be upsizing its convertible note offering from its planned $1.3 billion to $1.6 billion. In addition, Elon Musk has raised the size of equity he will be buying from $10 million to $25 million - a sum that represents about 0.08% of the billionaire's reported net worth.
Tesla also priced to sell an upsized slug of equity as part of its combined equity and debt financing deal that we reported on yesterday morning, and which is meant to fill a liquidity shortfall which according to Musk did not exist as recently as one quarter ago.
After market close on Thursday, Bloomberg reported that on an investor call to fill out Tesla's proposed $2 billion offering, Musk "confidently told investors on the call that autonomous driving will transform Tesla into a company with a $500 billion market cap". On top of that, Musk claimed that Teslas would increase in value and will be worth up to $250,000 within three years.
And just a few hours later, the news hit that Tesla sold an upsized portion of its proposed equity financing to
gullible marks investors.
As a reminder, yesterday the company unexpectedly filed a registration statement seeking to raise $2 billion in cash by selling about 2.7 million shares (~$650 million in stock) and $1.35 billion in convertible notes. Now it looks as though the company will net closer to $2.4 billion as a result of upsizing both the equity and debt portions of the deal.
Last night, Musk's latest vision of grandeur had stoked investor appetites, and the equity offering was upsized by 400,000 shares to the tune of 3.1 million shares, pricing at $243 per share. The price represented a 0.45% discount to the latest close, with TSLA shares sliding 15% in the past month. TSLA stock was 0.6% higher after hours.
Whether or not it was the allure of Elon Musk essentially putting a $2000+ price target on his company's stock, demand for the company's financing exceeded what it initially sought to raise.
In news that we think will be eventually be worth noting, on the very same investor call, Tesla neophyte CFO Zach Kirkhorn reminded investors that nothing had changed in Tesla’s outlook for Q2. The company still expects to deliver 90,000 to 100,000 vehicles in the second quarter, and 360,000 to 400,000 vehicles total this year, a number which looks increasingly unreachable following the disastrous first quarter.
While this may be a matter of kicking the can down the road, this financing will likely give Tesla several more quarters of breathing room – and more importantly, it looks as though it’ll close before the company reports April's delivery numbers.
But the most interesting part of the deal is that it was lead managed by Goldman Sachs (as well as Citi, Bank of America Merrill Lynch, Deutsche Bank Securities, Morgan Stanley, Credit Suisse, Societe Generale, and Wells Fargo). And, as a reminder, lead underwriter Goldman has a sell rating and a $200 price target on the stock. We wonder if that means the stocks will now tumble, or if Goldman will come out tomorrow with an upgrade of TSLA, and a brand spanking new $2000/share price target.